Bulk Water Tariff Review 2013/14. 17 APRIL 2013. Outline. Compliance to section 42 Impact of previous SALGA recommendations Summary of proposed increases and analysis Key Issues Recommendations (Highlights of each WB review). Compliance to Section 42. 3 3.
Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.
17 APRIL 2013
Justification required for increasing profit margin.Projected water losses of 25% for 2013/14?Possible to delay capital investment plans to cater for WC/DM initiatives?Reduce interest cover without impacting on debt covenants?Conclusion: Adjust downwards
Lower interest cover possible?Social development to be funded by the fiscusRecognise accounting loss on retirement fund immediatelyFlat volume growth too conservative? UW says no.Conclusion: Adjust downwards (work on lower interest cover)
Very high overhead allocation (22% for some plants).Water sold appears to exceed water purchased in some casesCash reserves being built up, no plans for further debt?Is cross-subsidisation based on fair principles?Conclusion: Consider accepting but need to see evidence of improved efficiencies at Head Office level
Very low margins projected for next 3 years will make it difficult to raise debt if required.At risk of slow Debtor paymentCustomers have very high water losses – impacts on their ability to pay their bulk chargesImprovements in infrastructure requiredConclusion: Accept increase – but intervention required.
Low profit margins, declining ROA, and poor debt collection difficult to raise debt if required.Funding secured yet for Pilanesberg Programme?Affordability of projected increases?High overheads after loss of s30 work – not ring-fenced?Low refurbishment budget – sustainable?Conclusion: Accept increase – but affordability and sustainability concerns
Differentiate between Municipal and Mining sectors to allow for cross-subsidisation/full cost recovery from minesConfirm DWA Grants for NamakwaImprove Debt collectionConclusion: Accept increase – but recommendations need to be implemented
Accelerated depreciation results in higher tariffs for cross-subsidisation/full cost recovery from minesFuture sales growth very conservativeElectricity increases appear to be in excess of Eskom ratesAffordability concerns given trend of above-inflation increases.Conclusion: Consider a lower rate
Losses on secondary activities are over-shadowing the primary activitiesCash-flow capex projections not supported by Business PlanProposing a sharp increase, followed by 2 years of tariff reductions – why not a sustained (lower) increase?Significant drop in turnover predicted for 2013 – Secondary?Conclusion: Smooth tariffs – reduce 2014
Very poor debt collection and hence liquidity issues primary activitiesContinued institutional uncertaintyConclusion: Support increase, but urgently need to resolve unsigned SLAs with customers and create clarity on institutional future.
Is a need to renegotiate water allocations with major customersReduce fixed cost proportion of tariffDelay Capex plansReduce Debtors’ daysConclusion: Adjust tariff down based on above
Risk of bad debts customersConsider smoother tariff increaseRe-model to factor in debt financeConclusion: Adjust tariff down for a smoother trajectory